CHAPTER 11

1. CHAPTER 11 GLOBAL t PENG © 2010 Cengage Learning. All rights reserved.

2. Chapter 11 LEARNING OBJECTIVES After studying this chapter, you should be able to: • Define alliances and acquisitions • Articulate how institutions and resources influence alliances and acquisitions • Describe how alliances are formed • Outline how alliances are dissolved • Discuss how alliances perform • Explain why firms make acquisitions and what performances problems they tend to encounter • Articulate what you can do to make global alliances and acquisitions successful © 2010 Cengage Learning. All rights reserved.

3. LO1: DEFINE ALLIANCES AND ACQUISITIONS Strategic alliances – voluntary agreements between firms involving exchange, sharing or co-developing products, technologies or services. © 2010 Cengage Learning. All rights reserved.

4. LO1: DEFINE ALLIANCES AND ACQUISITIONS • Acquisition – transfer of the control of operations and management from one firm (target) to another (acquirer) • Merger – combination of operations and management of two firms to establish a new legal entity © 2010 Cengage Learning. All rights reserved.

5. LO2: INFLUENCE OF INSTITUTIONS Formal institutions Antitrust concerns – antitrust authorities more likely to approve alliances than acquisitions. Entry requirements – many governments place limitations on foreign firm’s mode of entry © 2010 Cengage Learning. All rights reserved.

6. LO2: INFLUENCE OF INSTITUTIONS Informal institutions Normative pillar –firms copy other reputable organizations to establish legitimacy. Cognitive pillar – internalized, taken-for-granted values that guide alliances and acquisitions. © 2010 Cengage Learning. All rights reserved.

7. LO2: INFLUENCE OF RESOURCES Alliances can create or diminish value • Choosing wrong partners. • Potential partner opportunism. • Risk of helping nurture competitors (learning race). • Reduce costs, risks and uncertainties. • Access complementary assets and learning opportunities. • Use alliances as real options. © 2010 Cengage Learning. All rights reserved.

8. LO2: INFLUENCE OF RESOURCES Resources and Alliances Rarity – relational (collaborative) capabilities, the ability to manage inter-firm relationships, may be rare. Inimitability – alliances may make it easier to observe and imitate firm-specific capabilities. Organization – some successful alliances are organized in a way that is difficult to replicate. © 2010 Cengage Learning. All rights reserved.

9. LO2: INFLUENCE OF RESOURCES Resources and Acquisitions Do acquisitions create value? Firms involved must supply rarity to the acquisition. Successful post-acquisition integration is hard to imitate. How are the firms organized to benefit from acquisition? © 2010 Cengage Learning. All rights reserved.

10. LO3: FORMATION OF ALLIANCES © 2010 Cengage Learning. All rights reserved.

11. LO4: DISSOLUTION OF ALLIANCES © 2010 Cengage Learning. All rights reserved.

12. LO5: PERFORMANCE OF ALLIANCES • Equity • Learning and experience • Nationality • Relational capabilities It is the combination of these factors that jointly indicates the odds for success of strategic alliances. © 2010 Cengage Learning. All rights reserved.

13. LO6: ACQUISITIONS © 2010 Cengage Learning. All rights reserved.

14. LO6: ACQUISITIONS © 2010 Cengage Learning. All rights reserved.

15. DEBATE: MAJORITY JV vs. MINORITY JV Majority: Implementation is difficult. Partners in emerging economies often resent Western dominance. At times, 50/50 management control is granted, even though MNE has majority equity. Minority: Valuable as real option. Becomes more valuable as conditions become more uncertain. Recommended toehold instruments. © 2010 Cengage Learning. All rights reserved.

16. LO7: MAKING GLOBAL ALLIANCES AND ACQUISITIONS SUCCEED © 2010 Cengage Learning. All rights reserved.